Condo HOA Fees

[bonbonbaron]

Hi. So I bought this condo July 2018 with a mortage of $155,000 at 4.5% interest. Currently the principal balance is $97,000. (I was attacking it fiercely before MMM'ers taught me, "You do know the stock market's interest is bigger than your condo's, right?" Shoot!)

In addition to my monthly mortgage payment of ~$1,100 (without any prin-only payments), they charge a $415 HOA fee. That includes all the gas, water, yard maintenance, and pool maintenance fees, as well as any foundation or exterior repairs. So I was wondering what you guys thought about that. HOAs are definitely a real pain in the butt (from all these horror stories I hear from family and friends-- e.g. "They won't let me have a blue-striped umbrella over my patio table!" Seriously??). But is that an acceptable deal? Or would looking for a house be better for savings?

I'm single with a puppy-- no wife or kids to further leverage the "unlimited" gas and water.

[Padonak]

Where are you located?

[Mike in NH]

My condo fees for a $250K townhouse in a nice new development were $250/month. That did not include heat and water, but I was in New England so it included snow removal and shoveling up to the front steps. It also included trash which you didn't mention in your summary.

I think it really depends on your individual personality and the specific finances of the options you have available to you. 

I loved living in a condo. It made a lot of sense at the time since I traveled quite a bit for work, it was nice to not have to spend my weekend mowing the lawn or fixing things up around the house. If you are a skilled DIY kind of person, maybe it's a better deal to have a home and do stuff yourself. But homes come with roofs and windows and decks and paint and lawns and a million other things that can add up to just as much if not more than a condo fee over time, along with the headaches and time investment needed to deal with them. And don't kid yourself that neighbors can't be just as bad as an overbearing homeowner's association. Have some trashy people move in next door and you'll wish you had an HOA to keep tabs on them for you haha.

As far as the finances, you'd have to compare what it would cost to have a house in your area, plus maintenance which is usually estimated at 1% of the value per year. Don't forget your time, and the additional costs of ownership...you have a house, now you need a lawnmower, snowblower, etc etc. If you aren't handy and have to pay someone every time something needs to be fixed, the cost goes up quickly. 

There's a lot for you to consider. Maybe even buying a house and renting out your condo as an easy transition into real estate investing if the numbers work based on rents in your area. Also, FWIW, I'd take a look at refinancing that 4.5% rate down if you are planning to be there for a while.

[the_fixer]

Depends on a bunch of factors, is the HOA good, are they well funded do they take good care of the property?

You also have to factor in what you would pay in a non HOA residential community typically single family.

So in a normal single family you will typically still have an HOA if some sorts. Here in Colorado they typically run $200 - $600 a year so you will have to account for that when comparing.

Also they maintain a portion of the property for you so what would that cost per year if you were to do the work yourself or pay for it? Landscaping, paint, siding, roof, parking and so forth.

Sounds like you also get some utilities / insurance so you have to factor that in and account for the difference in costs.

If it is a good HOA / community I think you will find that the cost is less than if you paid someone to do the maintenance and a little more than if you did the work.

In a bad HOA all bets are off and I would avoid them like the plague so do your research and attend a board meeting


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[ixtap]

Does your HOA have ridiculous rules about what you can put on the patio or are you just referring to the worst case scenarios you have read on the internet?

What percentage of the houses in your area are also under HOA?

Two years after your purchase seems like an odd time to become concerned about the HOA fees. By now, you know whether or not you actually enjoy living there, whether or not the costs are worth it to you.

[damnedbee]

My condo fees are $282/month and cover the same things as yours, less gas, and plus trash/recycling. They are reasonable. I pay close attention to governance documents from the board and property managers to understand how fees are being assessed and applied. I also look closely at the association's reserves and renter/owner ratios. There are lots of "hidden" risks with living in a condo. As much as I HATE shared-wall life, I would probably hate spending $700K for a decent single family home in a HCOL area even more. So condo life it is for a bit longer.

[jim555]

You can look at the annual statement to see where the money is going. 

[Noodle]

Bad HOAs suck. Competent HOAs are OK to live with. (Also there is a difference between the HOA and the management company they may hire to handle the complex business. Our board is fine, but our management companies tend to fall on a spectrum between terrible to mediocre.) Ours tries to balance reasonable fees with proper maintenance of a ca. 30-year-old complex. I don't agree with every decision they make, but none of them are outrageous. And frankly, I have several neighbors who are nuts and I would consider our board saints for putting up with them. Moneywise, I pay a little over $300 for water, trash, and maintenance of landscaping, pools and common areas. We have had multiple big repairs this year including a sewer repair that makes me grateful not to be handling my own contracting.

[ministashy]

Speaking as someone who (reluctantly) has been on the board of my HOA for 7+ years now--it's amazing the number of things that condo owners don't realize their dues have to pay for.  Not just physical things, like landscaping, building repairs, water, sewer, pools and such (tho that is certainly a large chunk), but also the 'invisible' stuff--paying for insurance (of various types, including liability, damage, earthquake, flood, depending on what is needed), maintenance of parking areas and parking structures (asphalt, restriping and resealing ain't cheap!), legal representation (so that the HOA can go after deadbeat owners who aren't paying their bills/refusing to fix their units/causing other problems), even paying for the property management company itself (so that there's a manager there to handle the literally hundreds of e-mails, get bids from contractors, interface with lawyers/insurance agents/everyone else, and take emergency calls 24/7).  And that's without ever factoring in the amount of money an HOA needs to keep in reserve in case of catastrophic repairs and the like.  Most HOAs are chronically underfunded on that front--according to our property manager, our HOA is one of the better ones she's seen, and we still have less than half the recommended amount in savings.  But bringing it up to recommended levels would require tripling our dues, which would cause all the owners to storm the annual budget meeting in mass protest, so we have to settle for 'good enough' and hope we don't run into a catastrophe that would require a special assessment.

I can't say whether your HOA dues are reasonable without knowing your area and looking at your association's budget (something that every condo owner should do regularly, IMHO), but I just wanted to point out that there's a lot more behind the scenes that has to be paid for than most people realize.  A previous property manager said something that's always stuck with me:  "when you buy a condo, don't think of yourself as the owner of a single unit, but rather as a part-owner of a multi-million dollar property."

The upside to all this, of course, is that if you're not on the board, then you have the luxury of not having to worry about any of this, as it's taken care of by the HOA.  You pay your dues and as long as you have a reasonably competent board/property manager, then everything else just happens invisibly.  It's when you get incompetent managers/board members that the horror stories happen, and then people bitch about how evil and awful and overbearing HOAs are.

[JoJo]

A couple others have mentioned them, but the balance and amount going into the maintenance reserves are important.  You could compare 2 condos, one has fees of $250, but anothers is $400.  The $250 isn't such a good deal when they slap you with a $10,000 assessment.

I had to pay a $7000 assessment at my condo.  The sad thing is almost all of it went to defending ourselves from a friviolous lawsuit from one of the homeowners.  Even though the HOA won the case, the judge only made the homeowner pay a small fraction of our defending costs. 

[American GenX]

In addition to my monthly mortgage payment of ~$1,100 (without any prin-only payments), they charge a $415 HOA fee.

Is that $415 every month as well???  If so, that sounds ridiculously high.  I was actually turned off from some homes that charged up to $150 per "year" fees related to their community.  I don't recall if they were called HOAs now as that was 18 years ago. lol

[Laura33]

If you want to figure out whether it's a good deal or not, figure out how much of that you would need to spend anyway if you had your own SFH.  That includes:

- Gas/water that you would need to pay monthly
- Lawn and pool maintenance
- 1% estimate for your own long-term "reserves" for new roof, windows, and other big periodic maintenance and repairs
- Additional cost of providing all your own insurance ("contents-only" condo policies tend to be cheaper than full home policies)
Additional property taxes (if applicable)

Condo fees do tend to be a little higher than if you did it yourself, because typically you need to pay the management company, and the condo association has to file taxes and hire a lawyer to make sure they manage everything in compliance with the law, etc.  So to some degree you are paying for convenience.  In addition, some condos have amenities that you may not care about, like gyms and pools; if you're paying for that and don't use them, then that is effectively wasted money.  OTOH, condo associations can often save some money on things like standard maintenance because of what is basically a volume discount, so when work does need to be done, they may pay less proportionately than you would if you hired someone.  So it's hard to tell exactly how they compare, but the analysis above will get you a good chunk of the way.

Of course, the other alternative is just to decide that you're happy enough with where you live and how your overall finances are doing and stop fretting about it.